Self-insureds, captives, risk retention groups, and insurance companies depend on Milliman to provide retention analyses. Clients who choose to retain risk believe that in the long run, retaining a portion of the risk oneself is more cost-effective than transferring that risk through the purchase of insurance or reinsurance. For these clients, the optimal retention level will depend on:

• Appetite for risk: In broad terms, clients want to retain predictable losses and transfer unpredictable losses. Each client’s appetite for risk will vary, however, depending on its goals with regard to earnings stability, profitability, and capital structure.
• The insurance market: Our clients do not operate in a vacuum and any risk not retained by the client needs to be transferred elsewhere. The total cost of risk will depend on the rates charged by the insurance market.
• Regulatory constraints: The retention level may be mandated or restricted based on a client’s surplus level, financial condition, annual funding levels, and so on.

Milliman consultants combine sophisticated tools and analytical ability with a deep understanding of the insurance market to help clients identify their optimal retention.